Thousands of American companies line up for "tax refunds" — the embarrassing U.S. tariff war attempts to save face

Companies are rushing to Washington, trying to recover the billions of dollars in tariffs (total tariffs) collected by the federal government last year.
Samir Kapadia, trade director at Vogel Group, an international government affairs consulting firm, described the current situation in U.S. business circles as a “spectacle.” Currently, more than a thousand American companies, including Costco, have lined up in long queues, eager to ensure they can get their paid tariffs refunded.

This nationwide wave of refunds stems from a significant ruling by the U.S. Supreme Court. On February 20, the Supreme Court announced its decision, ruling that the U.S. government’s imposition of so-called “reciprocal tariffs” and tariffs on fentanyl under the International Emergency Economic Powers Act (IEEPA) was illegal. As a result, starting from 12:01 a.m. Eastern Time on February 24, the U.S. will officially cease imposing such tariffs on trade partners.

However, the legal victory does not mark the end of uncertainty. On the same day as the ruling, President Trump announced he would sign a new order, using Section 122 of the Trade Act of 1974 (referred to as “Section 122”), to impose an additional 10% tariff on global goods on top of existing regular tariffs.

On the 21st, Trump further declared on social media that he would immediately raise this global tariff rate to 15% and promised to release a new, “legitimate” tariff plan in the coming months.

Michael Pearce, chief U.S. economist at Oxford Economics, told First Financial that tariffs under Section 122 are essentially time-limited, and their ultimate validity depends on subsequent adjustments. He said this tool is somewhat crude and is likely to be replaced by more durable measures, including Section 232 tariffs targeting specific goods and Section 301 tariffs targeting broader imports from certain countries.

Ruling brings positives, refund issues become focus

The Tax Foundation, a U.S. think tank, estimates that under the IEEPA framework, tariffs have increased the average household tax burden by about $1,000 in 2025. If continued, this will rise by another $1,300 in 2026.

Clark Packard, a trade policy analyst at the Cato Institute, said the ruling provides tangible relief for Americans suffering from “unwise tariffs.” He recalled that during last year’s policy turmoil, the nearly hourly changes in tariff rates caused disruptions to small businesses that were as damaging as the high tariffs themselves.

From an economic impact perspective, BCA Research, a global investment consulting firm, stated in a research note to reporters that in the short term, U.S. federal revenue will decline as a result, by about 0.5% to 1% of GDP. Since Trump and the Republican Party have no intention of increasing revenue through new legislation, this will lead to a slight expansion of the budget deficit and put upward pressure on bond yields.

Neil Bradley, chief policy officer at the U.S. Chamber of Commerce, said the Supreme Court’s ruling is good news for businesses and consumers. “Rapidly refunding illegally collected tariffs is significant for over 200,000 small importers in this country and will help support stronger economic growth this year,” he said.

But refunding will be a major issue. Justice Clarence Thomas of the Supreme Court explicitly warned in the ruling that the hundreds of billions of dollars in refunds will have a significant impact on the Treasury, and the Court has not yet provided specific guidance on how the government should return this large sum. He admitted that, as acknowledged during oral arguments, the implementation process is very likely to turn into a “chaos.”

According to the “Penn Wharton Budget Model” from the Wharton School at the University of Pennsylvania, the U.S. government may need to refund over $175 billion in tariffs to importers.

Pearce also told First Financial that although tariffs are expected to be almost immediately halted, whether the Treasury must provide refunds will trigger a prolonged legal challenge. “This is likely to be controversial, time-consuming, and operationally difficult. The longer it is delayed, the more complicated the issue becomes.”

Guan Jian, partner at Beijing Guangwen Law Firm, told First Financial that under U.S. Customs and Border Protection regulations and the Customs Law, importers have the right to apply for refunds of “illegally or erroneously collected” tariffs, but the process is highly inefficient. Even if the government does not delay, under current administrative procedures like mailing checks, it usually takes 1 to 2 years for importers to receive refunds.

Salvatore Stile II, a customs broker in New York, also described that many clients are asking when they will get refunds. He believes that, given the lengthy legal procedures and administrative backlog, some cash-strapped importers might choose to sell their refund rights at a discount to hedge funds for immediate cash.

New tariffs are in place, but midterm elections remain a constraint

Regarding the 15% tariff imposed by Trump under “Section 122,” Packard analyzed that while this new tariff alleviates some pressure on certain high-tariff countries, it remains a heavy blow to most others. A deeper concern is that, although the provision is valid for 150 days, the government could theoretically reset the clock by declaring a new “international balance of payments emergency,” thus circumventing the time limit.

BCA Research believes Trump is attempting to use trade restrictions to regain political favor, but the scale of the new measures will not be as broad as the rejected IEEPA tariffs. To curb inflation before the midterm elections, the scope of these measures may be limited, which could boost business confidence to some extent.

Matthew Ryan, head of market strategy at cross-border fintech company Ebury, shared a similar view, telling First Financial, “We expect Trump not to actively expand tariffs before the midterm elections, mainly because tariff policies are unpopular and could negatively impact financial markets. We anticipate policy continuity, with tariffs remaining high but not returning to pre-Trump 2.0 levels. However, he may make targeted, moderate adjustments based on negotiation progress.”

Undeniably, new uncertainties are emerging. Everett Eissenstat, partner at Pugh Weiss law firm and former senior aide at the U.S. Trade Representative’s Office and Congress, predicts that upcoming trade discussions will be more intense than in the past year.

Washington lobbyists generally believe that the Supreme Court’s ruling will greatly increase pressure on Trump to deliver his State of the Union address on Tuesday, February 24. Republican strategist Mark Williams said, “This ruling makes the State of the Union a must-watch TV event. Now everyone in Washington is watching to see how the government responds.”

Responses from trade partners

Over the past year, the U.S. government used IEEPA tariffs as leverage to force several economies to reach trade agreements and agree on new rates. However, these agreements are now in an “awkward” position due to the ruling. According to the Swiss-based trade monitoring organization Global Trade Alert (GTA), when weighted by trade, the replacement of IEEPA tariffs with the unified “Section 122” tariffs has led to very different outcomes for various countries. The UK, EU, Singapore, Japan, and South Korea face tariff increases of 0.4 to 2.1 percentage points; in contrast, Brazil, which was most affected by IEEPA tariffs, saw its tariffs drop sharply by 13.6 percentage points.

As Kapadia said, “Right now, more than 50 countries and regions are asking: ‘Do I still need to honor my commitments?’”

Across the Atlantic, the European Commission has explicitly demanded “full transparency” from the U.S. regarding the ruling and stated that “agreements are agreements,” emphasizing that tariff increases should not exceed the 15% cap agreed upon last August. The European Parliament’s Trade Committee will hold an emergency meeting on Monday, February 23, to discuss Trump’s latest trade measures. Bernd Lange, chair of the European Parliament’s International Trade Committee, said he will propose suspending the implementation of the U.S.-EU trade agreement until the EU receives a “comprehensive legal assessment and the U.S. provides clear commitments on the latest tariffs.”

German Chancellor Friedrich Merz plans to visit Washington soon, emphasizing that he will represent a “coordinated European stance” in negotiations, but also noted that tariff policy decisions are within the EU’s authority, not individual member states. German Finance Minister Lars Klingbeil said Europe is strengthening its independence and sovereignty by establishing new global trade relationships and signing free trade agreements. French Trade Minister Nicolas Forissier hinted that Brussels might retaliate against Washington, urging EU member states to “not be naive” and to act in unison against the White House’s new trade stance. On February 22, European Central Bank President Christine Lagarde also warned that any new tariff plans should be “fully weighed” and comply with the U.S. Constitution to avoid further disrupting business and provoking litigation.

Helene Budliger Artieda, head of the Swiss State Secretariat for Economic Affairs (SECO), stated bluntly that Switzerland should prepare for the possibility that U.S. tariffs could become permanent. She believes that regardless of legal changes, the U.S. government’s goals of reducing deficits, pursuing reciprocity, and bringing manufacturing back have not changed, and countries may have to accept the long-term existence of tariffs.

In Asia, South Korea’s Minister of Trade, Industry, and Energy, Lee Joo-hyun, said Seoul will seek friendly negotiations to ensure that the benefits of the Korea-U.S. tariff agreement are not diminished. A spokesperson for Singapore’s Ministry of Trade and Industry said they are closely monitoring the situation and are in contact with U.S. authorities to seek clarity on the implementation of the new “Section 122” tariffs and refund procedures.

(Source: First Financial)